Spanish Napster defeats music majors

What an effervescent start to 2014 for intellectual property in Spain! Among law reforms, seminal rulings on ISP liability and catastrophic surveys on online piracy, Katfriend Carlos Garcia Berned (right) just brought to the IPKat's attention another challenging decision from the District Court of Madrid, this time on a new-generation P2P technology that music majors don't appreciate that much -- while users appears to do. Says Carlos:

 "Spain is an exciting country, and not only for the political debate regarding a possible territorial reorganisation or for the eternal football battle between Madrid and Barcelona. In the last few weeks, for instance, the Spanish intellectual property environment has also been rather animated. Between the inflaming discussion about Spanish copyright law reform [on which see the IPKat’s note here] and the right-holder sponsored study pointing out that 84% of online content used in Spain is pirated [here; Merpel doesn’t want to believe that copyright is so ignored in that lovely country and prefers to be 86% sure that those figures could have been overestimated], a recent decision from the District Court of Madrid pops up to deal with music industries and P2P programs [District Court of Madrid decision of April 9 2014, available here in Spanish].  Here’s how it went. 

The plaintiffs were some of the most important music majors -- including Universal, Sony, EMI, Warner and the Spanish Promusicae. The defendant was Mr Pablo Soto, a software developer known as the “Spanish Napster” [an elegant metonymy, notes Merpel] who invented created P2P platforms Blubster, Piolet and Manolito. In a nutshell, these platforms used new P2P technologies which let users who downloaded the application share files without further accessing the platforms' websites [see Mr Soto’s home page, here]. Apparently, Mr Soto was successful enough to bring the music industry to seek not just the immediate shut-down of all the defendant’s activities but also more than EURO 13 million in compensation for damages. They brought proceedings claiming copyright infringement and unfair competition, alleging that Mr Soto’s software let users share pirated music. Mr Soto responded that his technology was neutral and consequently not responsible for the final use that people made of his applications. 

In November 2011, the first instance ruling accepted Mr Soto’s defence and dismissed the majors’ claims. The music companies appealed to the Madrid District Court, which also rejected their claims some days ago, declaring the defendant’s technology not liable for the activities carried out via his P2P software.

As a matter of principle, the District Court of Madrid held that sharing works covered by intellectual property rights is only permitted where it enjoys the right holder’s authorisation, which may also occur when the right holder shares content under a General Public License (GPL) such as the Creative Commons. However, the defendant was not carrying out any infringing activities, either directly or indirectly. The Court acknowledged that Blubster, Piolet and Manolito did not require intervention by the software developer after the user downloads the P2P application. This being so, use of the software did not imply a direct copyright infringement, as neither the reproduction right not the making available right could be infringed by the defendant when all the file-sharing activities were carried out exclusively by users, and between their computers. In a clear and emphatic manner, the Court pointed out that 

“the introduction into the market of a technology with different features, and in particular the possibility for users to directly perform audio file sharing, which may also be used in a lawful manner … for the transmission of files with no infringement of intellectual property provisions, implies, from a legal point of view, a neutral behaviour, which is in line with the right to conduct a business [the Court is referring to Article 38 of Spanish Constitution, here]. The mere possibility that users may cause harm does not entail a direct liability of the software developer, who has no control of the uses done with the P2P platforms he develops”.

In this perspective, the Court held that the defendant could not be submitted to the same liability regime of internet service providers (ISPs). Nor could the defendant’s activity be assimilated to those typically performed by ISP under the E-Commerce Directive and the Spanish law that transposed it, as the P2P technology neither provides access to the internet nor conducts caching, hosting or linking services.

This decision may ring a bell in some readers’ head, recalling analogue situations of US cases such as KaZaA, where the US Supreme Court dealt with the concept of liability for “actively inducing” copyright infringement. In this regard, the Madrid Court held that the US courts' approaches to “contributory liability” and “vicarious liability” could find  no application in Spain, as indirect liability lacks a normative basis under Spanish law and the courts are thus not in a position to establish secondary liability "by analogy", in the way the US courts do.

Mr Soto is that young

As per the unfair competition claim, the court rejected it: the parties were not competitors sharing the same market, and developing software was not an act of looting, unfair competition or unfair benefit from another’s effort per se.

While reading the decision, this author wondered whether the District Court’s purpose was sending an indirect message to the Spanish legislator. Where the Court stressed the necessity to have a normative basis to indirect copyright infringement, it added that it is for the Spanish Parliament to issue specific provisions to determine the scope and requirement of indirect copyright infringement. Will the Spanish legislator take note of this? This author remains sceptical. Meanwhile, the “Spanish Napster” is celebrating his victory, launching another version of the software and, ironically tweeting: 

“I beat the big record companies, once again. Thank goodness because, right now, I have not even a euro, and paying 13 million to them was really bad for me".